RAK Ceramics profit declines in first quarter

Profit at RAK Ceramics dipped in the first quarter as its earnings were hit by hyperinflation in Sudan and Iran, along with distribution challenges.

Net profit after non-controlling interest deductions fell by 0.2 per cent to Dh57.9 million from Dh58m year-on-year.

Sales grew by 0.4 per cent to Dh744m from Dh740m. Its net debt decreased by 3.2 per cent to Dh1.36 billion from Dh1.41bn.

RAK Ceramics was not immediately available for comment.

The company’s core revenue from ceramics sales declined 5.8 per cent year-on-year to Dh656m in the first quarter. The Abu Dhabi-listed company’s core business includes the manufacture of ceramics tiles, sanitary ware and table ware, while non-core businesses includes contracting, property development and pharmaceuticals.

During the first three months, the group completed the sale of its stake in the adhesives company Laticrete RAK, the mosquito coil manufacturers RAK Mosfly Bangladesh and RAK Pharmaceuticals Bangladesh. It is expected to exit its Sudan subsidiary this quarter.

“We expect continued strong performance from the company’s top line as capacity expansions in Bangladesh and India are phased into production throughout the year, as well as recovering sales in Saudi Arabia,” said Dina Elkamel, an analyst at the investment bank CI Capital in Giza, Egypt.

She estimates full-year revenue for this year will be Dh3.5bn, a 13 per cent increase year-on-year.

A favourable product mix, the phase-out of loss-making operations and reduced freight and procurement costs on cheaper energy costs are expected to drive RAK Ceramics’ performance this year.

The Ras Al Khaimah-based company is also expected to dispose of more non-core assets this year.

“The most sizeable of these assets is Al Hamra plot of land [in Ras Al Khaimah], which alone is worth Dh899m if sold at book value,” said Ms Elkamel. “The potential lift of sanctions in Iran during the year, where the company has 6 million square metres a year of tile capacity, represents an upside to our forecasts.”

RAK Ceramics, one of the world’s largest manufacturers of ceramic tiles, said last year that it would focus on expansions and business in the UAE and Saudi Arabia as well as in India and Bangladesh this year. Its major growth market was the UAE, where it increased revenue by 20 per cent year-on-year. It booked a loss of Dh56.5m last year because of hyperinflation in Iran and Sudan.

It is also expected to close its loss-making China unit. RAK Ceramics operates 15 factories around the world.


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